2 Top TFSA ETFs to Buy and Hold Forever

Value? Check. Global exposure? Check. All tax-free? Absolutely checked off!

Amy Legate-Wolfe ❯

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 21, 2024 8:15 pm EDT

A Tax-Free Savings Account (TFSA) is like a financial superpower for Canadians looking to grow their wealth without worrying about the taxman. And one of the best ways to flex this superpower is by investing in ETFs (Exchange-Traded Funds). With a TFSA, all the gains you make are completely tax-free. That’s whether they are from dividends, interest, or capital appreciation. This means more money stays in your pocket, which is exactly where it belongs. Plus, there’s no need to worry about reporting your gains to the Canada Revenue Agency (CRA), making tax season a breeze!

ETFs, on the other hand, are like the ultimate investment buffet. You get a little bit of everything, stocks, bonds, or other assets, all bundled into one neat package. By holding ETFs in a TFSA, you can diversify your investments with ease while still enjoying the perks of tax-free growth. Whether you’re aiming for steady income, growth, or both, a TFSA packed with ETFs offers a smart and simple way to build your financial future, all while keeping your earnings safely out of the taxman’s reach.

XAW

If you’re looking for a one-stop shop to invest in the global markets outside of Canada, the iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW) might just be your new best friend. With XAW, you get exposure to a world of opportunities, quite literally! This ETF covers a wide range of sectors, from tech and healthcare to consumer goods and financial services. That exposure gives you a diversified portfolio in one neat package. Plus, with nearly 100% of its assets in stocks, it’s designed to capture the growth potential of markets across the globe. All while keeping your investments straightforward and manageable.

One of the standout features of XAW is its heavy allocation to the United States market. This is known for being the engine of global economic growth. Plus, you also get a taste of the action in Europe, Asia, and emerging markets. These areas can offer some serious growth potential over the long term. With a reasonable expense ratio and a solid track record, XAW is a strong contender for anyone looking to build a globally diversified, long-term investment portfolio.

XVLU

The iShares MSCI USA Value Factor Index ETF (TSX:XVLU) is another hidden gem in the vast U.S. stock market. It’s all about value – specifically, capturing companies that trade below true worth. This ETF focuses on solid, established companies with strong fundamentals that might be flying under the radar. With a Price/Earnings (P/E) ratio of just 12.5, it’s clear that XVLU is designed for investors who appreciate getting more bang for their buck. Plus, with a diversified mix of sectors, including technology, healthcare, and financial services, you’re not just getting value. You’re getting a balanced portfolio that can weather market ups and downs.

What makes XVLU particularly appealing for long-term investors is its low beta, sitting at 0.88. This means it’s less volatile compared to the broader market, offering a smoother ride over the years. And with a solid yield of 2.1%, you’re not just relying on capital appreciation. You’re also getting some income along the way. Whether you’re looking to build wealth steadily or just want to add some value-focused investments to your portfolio, XVLU offers a smart, cost-effective way to tap into the U.S. market’s potential. While keeping risk in check.